ALDI AUSTRALIA CASE STUDY
Claire Creedon 08422991 Laura Ensor Aisling Flynn 08352992 08371687 _________________________ _________________________ _________________________ _________________________ Tutor: Paschal McNeill Gerard Murphy 08660085
We declare that all materials included in this case assignment is the end result of our own work and that due acknowledgement has been given in the bibliography and references to ALL sources be they printed, electronic or personal. All group members contributed equally to this work
ALDI AUSTRALIA CASE STUDY 2
Table of Contents
Question 1 Question 2 Question 3 Appendix 1.1 Appendix 1.2 Appendix 2.1 Appendix 2.2 Appendix 3.1 Appendix 3.2 Bibliography
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ALDI AUSTRALIA CASE STUDY 3
Q. 1. A company can outperform rivals only if it can establish a difference which it can preserve (Porter 1996). It must achieve the lowest costs relative to its competitors or create a unique or superior product for which customers are willing to pay a premium price (Porter, 1980) [See Appendix 1.1]. Porter theorized that there are 3 generic strategies; costleadership1, differentiation2 and market segmentation3; defined along two dimensions: strategic scope and strategic strength (Porter, 1980) [See Appendix 1.2]. A company only be (Porter, 1980) and rendered unviable (Thornhill & White, 2007). ALDI Australia (ALDI above average returns. Its strategic , undoubtedly follows a cost-leadership price consumer. strategy. Its strategic strength is its ability to offer incredibly low prices, while maintaining It is important to note that a cost leader is not necessarily a price leader4. As a new entrant to this mature industry, ALDI needed a unique value proposition that enabled it to compete with Groceries of the highest quality at (Osgeowitsch & Goelz, 2011). Thus, it is clear that ALDI is also following a price-leadership strategy, passing its cost-leadership savings onto its customers in the form of lower prices. Comparing an average basket of staple grocery purchases, ALDI prices ($61.25) are roughly 25% less than those of Coles ($81.68) and Woolworths ($82.28) (Osgeowitsch & Goelz, 2011). Cost-leadership strategy requires a firm to find and exploit all sources of cost advantage (Miller, 1986) and sell a standard no-frills product (Speed, 1989). ALDI does exactly this. The key to ALDI ALDI uccessful adoption of this cost-leadership strategy is its commitment to operational simplicity and strict control of overheads. ALDI can reduce cost
at all levels of the value chain using the following drivers of cost advantage (Grant, 2010): Economies of Scale Economies of Learning Bulk purchases. Increased individual skills through maintaining low employee levels, necessitating multi-skilling. Improved organizational routines through lean management structure and simple processes.
A cost-leadership strategy aims to create a sustainable competitive advantage by becoming the lowest cost producer in an industry for a given level of quality (Porter, 1980). 2 A differentiation strategy aims to create a unique product, which is different in ways valued by the customer, and for which a premium price can be charged (Porter 1980). 3 4 In certain instances, the company can charge an average price while following the low cost-leadership strategy and reinvest the extra profits into the business (Lynch. 2003).
ALDI AUSTRALIA CASE STUDY 4
30,000). Minimal service. Use of private label brands, pre-packed fresh goods, unit pricing, front of pack nutritional labelling, multiple bar codes. Access to low cost high quality products through tightly I nput Costs controlled relationships with local suppliers. Low labour cost. Capacity Utilisation New regional entities...